On the 27th March 2014 HSO attended Oil & Gas UK’s largest ever Aberdeen breakfast briefing, with key note speaker Sir Ian Wood outlining his proposals and the opportunities and challenges facing the new industry regulator.
As part of his keynote, Sir Ian Wood confirmed that the UK Continental Shelf (UKCS) has one of most mature basins in the world, with plenty of opportunity for new frontier sites and plays. The caveat to this was that investors face challenges as new discoveriesare smaller and more expensive to operate.
UKCS had record investment of £14 billionin 2013. This is expected to halve in the 2nd half of the decade.
There are also some serious underlying problems:
- Production is down 38% (2010 – 2013) – equates to 500m BOE less over the period
- 360m related to a fall in production efficiency, which in turn cost the HM Treasury £6bn in tax revenue
- Decline in discoveries meant less than 150m BOE being discovered in last 2 years.
- Many independent operators are using inefficient assets that are over 30 years old
The problem however, is not the licensing model. The model is working fine and consistently with other international success stories. The problems are largely centred on regulation, which has been too light. The current model must be adapted to rectify the following issues:
- Focus on maximising the UK’s economic recovery
- The need for fiscal stability
- The requirement for bigger and more proactive regulation
- The need for greater constructive collaboration between operations
To help overcome the challenges present within the Oil & Gas industry, Sir Ian Wood presented a series of recommendations to help the industry prosper:
- Government and industry to improve collaboration and develop new strategies for maximising the economic recovery
- Create a new regulatory body responsible for the stewardship of UKCS recovery and maximising the collaboration in exploration and development across the Oil & Gas industry.
- The regulators should take additional powers to facilitate implementation of MER UK
- Develop and implement important sector strategies that have been defined by DECC
The general consensus from the breakfast briefing and industry at large is that there are clear challenges. But the UK Oil & Gas industry is capable of overcoming these obstacles. But to do so, operators need to enhance collaboration to resolve issues that affect the whole industry.
The strong policies put forward by previous industry regulators had good intentions, but didn’t have the power to deliver. However, with the Government wholly behind them, the new regulatory powers should have the ability to execute these well-defined strategies to help empower business streamlining and operational efficiency in the UKCS.
How can HSO help?
One of the key points that we took from Sir Ian Wood’s presentation and the Aberdeen Breakfast Briefing as a whole was issue of efficiency and the need for operators to collaborate more efficiently with the supply chain and to improve the operational productivity of drilling and exploration activities in the North Sea Basin.
Operators in the Oil & Gas industry need to take the correct measures to lay the foundations for building efficient operational process models. By deploying Dynamics AX, Oil & Gas organisations will be in a better position to simplify and improve operational efficiency by consolidating supporting applications and streamlining core operations. Real-time visibility to manage resource availability can assist organisations gain more control over capacity utilisation and deliver meaningful long term benefits and improvements in profitability.